RBI says investment activity, capital goods production boosts FY 19 GDP estimates

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The gross domestic product (GDP) growth estimates for fiscal year 2018-19 was raised to 6.6%, compared to the earlier estimate of 6.5%, the RBI said in its first bi-monthly Monetary Policy Statement for 2018-19.

The gross domestic product (GDP) is a key indicator to measure a nation’s economy.

GDP measures the contribution of various sectors in an economy and provides a monetary value for the amount of goods and services produced over a particular period of time.

Capital goods production registered a 19-month high growth in January 2018, indicating a slowdown in investment demand.

Net exports were dragged down by Goods and Services Tax (GST) related working capital disruptions.

Merchandise import growth also weakened because of gold imports, and due to a weak external demand.

In the agriculture sector, the total food grain production for 2017-18 is expected to be 277.5 million tons, up about 0.9% from the previous year.

The manufacturing sector improved and remained in an expansionary mode for the eighth consecutive month in March, driven by increasing output and new orders.

In the services sector, growth of value added services surged, driven by trade, hotels, transport, communication and a significant uptick in construction activity.

Increased sales of commercial vehicles, tractors and two-wheelers, a strong upturn in production of consumer durables, rise in domestic and international air passenger traffic, also contributed to a significant rise in the GDP, the report said.

On the growth outlook front, RBI said that it expects GDP to strengthen from 6.6% in 2017-18 to 7.4% in 2018-19 due to sustained expansion of capital goods production and an increase in imports.

GDP growth for the first half is expected to be in the range of 7.3-7.4%  and 7.3-7.6% for the second half of the financial year.

Exports are also expected to rise due to higher global demand, and boost fresh investment.

In a poll conducted by CNBC-TV18, 10% of the respondents had expected RBI to cut its FY18 GDP forecast to lower than 6.5%, while 90% expected RBI to keep FY18 forecast unchanged at 6.6%.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow